Commentary on an HBR article about Start-ups & Entrepreneurship
A friend posted this article on LinkedIn.com. Due to character limitations for comments, I decided to post my response here. Below is a link to the article referenced: https://hbr.org/2019/07/building-a-startup-that-will-last
The article is interesting, but the emphasis on “second and third acts” assumes that the start-up will successfully navigate the first act. Even with addressing what the author views as key points this is still a very big assumption. The reasons for Longevity and Success are far more complex and multi-dimensional, but it does place a spotlight on some of the more important areas of focus.
Long-term success requires several things: The right combination of having a unique goal that has the potential to make a big impact (think “No software” from Salesforce.com); Innovative ideas to achieve that goal; A diverse team to build the product (a mix of visionaries, insightful “translators,” technical experts, designers, planners, adept doers, etc.); Very good sales / business development / marketing to describe a better way of doing things and converting that to new business; and ultimately a management team focused on sustainable and scalable growth.
The point made about the need to, “Articulate a value framework oriented toward societal impact, not just financial achievement” seems a bit superficial and too tactical in nature.
First, there are unintended consequences to most new technologies. Social Media is a recent example, but Genetic Editing and AI are two areas that are likely to provide more examples over the next decade. Not every societal impact will be positive, and having a negative impact could very well lead to the untimely demise of that company.
Second, the two ideas (societal impact and financial achievement) are not mutually exclusive. When I owned my consulting company we had a goal of funding $1M worth of medical research that would find a cure for Arthritis. We allocated half of our net profits for this goal. Every employee was on-board with this because there was a tangible example of why it mattered (my daughter). We invested $500K, helped launch a few careers for some brilliant MD/Ph.Ds and at least one national protocol came out of their research.
Mission and Vision are so important to a company, yet so many companies fail to view this as anything more than a marketing effort. Those companies fail to realize that this is as much to motivate and inspire their employees, as it is to grab the attention of a prospective customer. These should be both inspirational and aspirational, such as the “BHAG” (Big Hairy Audacious Goals) that Collins and Porras wrote about 25 years ago.
Regarding Endurance and the assertion that “…the best businesses are intrinsically aligned with the long-term interests of society,” my take is slightly different. The best businesses are always looking for trends and opportunities in an ever-changing global competitive landscape – as opposed to looking to their competitors and trying to ride on their coattails. Companies with a culture of fostering innovation as a way to learn and grow (Amazon and Google are two great examples) are able to find that intersection of “good business” and “positive societal impact.” It is much more complex than a simple one-dimensional outlook.
But, it was a good article to help reframe ideas and assumptions around growth.
One Successful Approach to Innovation that worked for an SMB
When I owned a consulting company we viewed innovation as an imperative. It was the main thing that created differentiation, credibility, and opportunity. We had an innovation budget, solicited ideas from the team, and evaluated those ideas quarterly.
Almost as important to me was that this was fun. It gave everyone on the team the chance to suggest ideas and participate in the process. That was meaningful and supported the collaborative, high-performance culture that had developed. The team was inspired and empowered to make a difference, and that led to an ever-increasing sense of ownership for each employee.
The team also had a vested interest in having the process work, as quarterly bonuses were paid based on their contributions to the company’s profitability. There was a direct cause and effect correlation with tangible benefits for every member of the team.
We developed the following 10 questions qualify & quantify the potential of new ideas:
- What will this new thing do?
- It is important to be very detailed as this was used to create a common vision of success based on the idea being presented.
- What problem(s) does this solve and how so?
- This seems obvious, but if you are not solving a problem (which could be something like “lack of organic expansion”) or addressing a pain point then selling this new product will be an uphill challenge.
- What type of organizations have those problems and why?
- This was fundamental to understanding if a fix was possible from a practical perspective, what the value of that fix might be for the target buyer, and how much market potential existed to scale this new offering.
- What other companies have created solutions or are working on solutions to this problem?
- The lack of competition today does not mean that you are the first one to attack this problem. Due diligence can help avoid repeating the failure of others, and potentially provide lessons learned by others and help you avoid similar pitfalls.
- Will this expand our existing business, or does it have the potential to open up a new market for us?
- There are upsides and downsides to each answer, but breaking into a new market can take more time and be more difficult, time-consuming, and expensive to achieve.
- Is this Strategic, Tactical, or Opportunistic?
- An idea may fall into multiple categories. When Sarbanes-Oxley (SOX) Act became law we viewed a new service offering as both a tactical means to protect our managed services business as well as an opportunistic means to acquire new customers and grow the business.
- What are the Cost, Time, and Skill estimates for developing a Minimally Viable Product (MVP) or Service?
- What are the Financial Projections for the first year?
- Cost to develop and go-to-market.
- Target selling price, factoring-in early adopter discounts.
- Estimated Contribution Margin Ratio (for comparison with other ideas being considered).
- Break-even point.
- Would we be able to get an existing customer to pre-purchase this?
- A company that is willing to provide a PO that commits to making a purchase of that MVP within a specific timeframe increased our confidence in the viability of the idea.
- What are the specific Critical Success Factors to be used for evaluation purposes?
- This was an important lesson learned over time that helped minimize emotional attachment to the idea or project, as well as providing objective milestones for critical go / no-go decision making.
This process was purposeful, agile, lean, and somewhat aggressive. We believed it gave our company a competitive advantage over larger companies that tended to respond slower to new opportunities and smaller competitors that did not want to venture outside their wheelhouse.
With each project, we learned and became more efficient and effective, and made better investment decisions that positively impacted our success. We monitored progress on an ongoing basis relative to our defined success criteria, and adjusted or sunset an offering if it stopped providing the required value.
The process was not perfect…
For example, we passed on a couple of leading-edge ideas such as a “Support Robot” in 2003 that was essentially an interactive program that used a machine-learning algorithm. It was to be trained using historical log files, could quickly and safely be tested in a production environment, refined as needed and ultimately validated.
This automation could have been used with our existing managed services and Remote DBA customers to further mitigate the risk of unplanned outages. Most importantly, it would have provided leverage to take-on new business without jeopardizing quality or adding staff – thereby increasing revenue and profit margin.
At the time we believed this would be too difficult to sell to prospective customers (“pipe dream” and “snake oil” were some of the adjectives we envisioned), so it appeared to lack a few items required by the process. Live and learn.
In summary, having a defined approach for something as important as business needs innovation to grow and prosper, as best demonstrated by market leaders like Amazon and Google (read the 10-K Annual Reports to gain a better understanding of their competitive growth strategies that are largely based on innovation).
Implementing this type of approach within a larger organization requires additional steps, such as getting the buy-in from a variety of stakeholders and aligning with existing product roadmaps, but is still the key to scalable growth for most businesses.
The Downside of Easy (or, the Upside of a Good Challenge)
As a young boy, I was “that kid” who would take everything apart, often leaving a formerly functional alarm clock in a hundred pieces in a shoe box. I loved figuring out how things worked, and how components worked together as a system. When I was 10, I spent one winter completely disassembling and reassembling my Suzuki TM75 motorcycle in my bedroom (my parents must have had so much more patience and understanding than I do as a parent). It was rebuilt by spring and ran like a champ. Beginners luck?
By then I was hooked – I enjoyed working with my hands and fixing things. That was a great skill to have while growing up as it provided income and led to the first company I started at age 18. There was always a fair degree of trial and error involved with learning, but experience and experimentation led to simplification and standardization. That became the hallmark to the programs I wrote, and later the application systems that I designed and developed. It is a trait that has served me well over the years.
Today I still enjoy doing many things myself, especially if I can spend a little bit of time and save hundreds of dollars (which I usually invest in more tools). Finding examples and tutorials on YouTube is usually pretty easy, and after watching a few videos for reference the task is generally easy. There is also a sense of satisfaction to a job well done. And most of all, it is a great distraction to everything else going on that keeps your mind racing at 100 mph.
My wife’s 2011 Nissan Maxima needed a Cabin Air Filter, and instead of paying $80 again to have this done I decided to do it myself. I purchased the filter for $15 and was ready to go. This shouldn’t take more than 5 or 10 minutes. I went to YouTube to find a video but no luck. Then, I started searching various forums for guidance. There were a lot of posts complaining about the cost of replacement, but not much about how to do the work. I finally found a post that showed where the filter door was. I could already feel that sense of accomplishment that I was expecting to have in the next few minutes.
But fate, and apparently a few sadistic Nissan Engineers had other ideas. First, you needed to be a contortionist in order to reach the filter once the door was removed. Then, the old filter was nearly impossible to remove. And then once the old filter was removed I realized that the length of the filter entry slot was approximately 50% of the length of the filter. Man, what a horrible design!
A few fruitless Google searches later I was more intent than ever on making this work. I tried several things and ultimately found a way to fold the filter where it was small enough to get through the door and would fully open once released. A few minutes later I was finally savoring my victory over that hellish filter.
This experience made me recall “the old days.” Back in 1989 I was working for a marketing company as a Systems Analyst and was given the project to create the “Mitsubishi Bucks” salesperson incentive program. Salespeople would earn points for sales, and could later redeem those points on Mitsubishi Electronics products. It was a very popular and successful incentive program.
Creating the forms and reports was straight forward enough, but tracking the points presented a problem. I finally thought about how a banking system would work (remember, no Internet and few books on the topic, so this was reinventing the wheel) and designed my own. It was very exciting and rock solid. Statements could be reproduced at any point in time, and there was an audit trail for all activity.
Next, I needed to create validation processes and a fraud detection system for incoming data. That was rock solid as well, but instead of being a good thing it turned out to be a real headache and cause of frustration.
Salespeople would not always provide complete information, might have sloppy penmanship, or would do other things that were odd but legitimate. Despite that, they expected immediate rewards and having their submissions rejected apparently created more frustration than incentive.
So, I was instructed to turn the dial way back. I let everyone know that while this would minimize rejections it would also increase the potential for fraud, and created a few reports to identify potentially fraudulent activity. It was amazing how creative people could be when trying to cheat the system, as well as how you could identify patterns to more quickly identify that type of activity. By the third month the system was trouble free.
It was a great learning experience from beginning to end. Best of all, it ran for several years once I left – something I know because every month I was still receiving the sample mailing with the new sales promotions and “Spiffs” (sales incentives). This reflection also made me wonder how many things are not being created or improved today because it is too easy to follow an existing template.
We used to align fields and columns in byte order to minimize record size, overload operators, etc. in order to maximize space utilization and maximize performance. Code was optimized for maximum efficiency because memory was scarce and processors slow. Profiling and benchmarking programs brought you to the next level of performance. In a nutshell, you were forced to really understand and become proficient with the technology used out of necessity. Today those concepts have become somewhat of a lost art.
There are many upsides to easy.
- My team sells more and closes deals faster because we make it easy for our customers to buy, implement, and start receiving value on the software we sell.
- Hobbyists like myself are able to accomplish many tasks after watching a short video or two.
- People are willing to try things that they may not have if getting started would not have been so easy.
But, there may also be downsides relative to innovation and continuous improvement simply because easy is often good enough.
What will the impact be to human behavior once Artificial Intelligence (AI) becomes a reality and is in everyday use? It would be great to look ahead 25, 50, or 100 years and see the full impact of emerging technologies, but my guess is that I will see many of the effects in my own lifetime.
Discussions that Seed the Roots of Creativity
A few months ago I purchased Fitbit watches for my children and myself. My goals were twofold. First, I was hoping that they would motivate all of us to be more active. Second, I wanted to foster a sense of competition (including fair play and winning) within my children. Much of their pre-High School experiences focused on “participation,” as many schools feel that competition is bad. Unfortunately, competition is everywhere in life, so if don’t play to win you may not get the opportunity to play at all.
It is fun seeing them push to be the high achiever for the day, and to continually push themselves to do better week-by-week and month-by-month. I believe this creates a wonderful mindset that makes you want to do more, learn more, achieve more, and make an overall greater impact with everything they do. People who do that are also more interesting to spend time with, so that is a bonus.
Recently my 14 year-old son and I went for a long walk at night. It was a cold, windy, and fairly dark night. We live in fairly rural area so it is not uncommon to see and hear various wild animals on a 3-4 mile walk. I’m always looking for opportunities to teach my kids things in a way that is fun and memorable, and in a way that they don’t realize they are being taught. Retention of the concepts is very high when I am able to make it relevant to something we are doing.
That night we started talking about the wind. It was steady with occasional gusts, and at times it changed direction slightly. I pointed out the movement on bushes and taller grass on the side of the road. We discussed direction, and I told him to think about the wind like an invisible arrow, and then explained how those arrows traveled in straight lines or vectors until they met some other object. We discussed which object would “win,” and how the force of one object could impact another object. My plan was to discuss Newton’s three laws of motion.
My son asked if that is why airplanes sometimes appear to be flying at an angle but are going straight. He seemed to be grasping the concept. He then asked me if drones would be smart enough to make those adjustments, which quickly led to me discussing the use potential future of “intelligent” AI-based drones by the military. When he was 9 he wanted to be a Navy SEAL, but once he saw how much work that was he decided that he would rather be Transformer (which I explained was not a real thing). My plan was to use this example to discuss robotics and how you might program a robot to do various tasks, and then move to how it could learn from the past tasks and outcomes. I wanted him to logically break down the actions and think about managing complexity. But, no such luck that night.
His mind jumped to “Terminator” and “I, Robot.” I pointed out that Science Fiction does occasionally become Science Fact, which makes this type of discussion even more interesting. I also pointed out that there is spectrum between the best possible outcome – Utopia, and the worst possible outcome – Dystopia, and asked him what he thought could happen if machines could learn and become smarter on their own.
His response was that things would probably fall somewhere in the middle, but that there would be people at each end trying to pull the technology in their direction. That seemed like a very enlightened estimation. He asked me what I thought and I replied that I agreed with him. I then noted how some really intelligent guys like Stephen Hawking and Elon Musk are worried about the dystopian future and recently published a letter to express their concerns about potential pitfalls of AI (artificial intelligence). This is where the discussion became really interesting…
We discussed why you would want a program or a robot to learn and improve – so that it could continue to become better and more efficient, just like a person. We discussed good and bad, and how difficult it could be to control something that doesn’t have morals or understand social mores (which he felt if this robot was smart enough to learn on its own that it would also learn those things based on observations and interactions). That was an interesting perspective.
I told him about my discussions with his older sister, who wants to become a Physician, about how I believe that robotics, nanotechnology, and pharmacology will become the future of medicine. He and I took the logical next step and thought about a generic but intelligent medicine that identified and fixed problems independently, and then sent the data and lessons learned for others to learn from.
I’m sure that we will have an Internet of Things (IoT) discussion later, but for now I will tie this back to our discussion and Fitbit wearable technology.
After the walk I was thinking about what just happened, and was pleased because it seemed to spark some genuine interest in him. I’m always looking for that perfect recipe for innovation, but it is elusive and so far lacks repeatability. It may be possible to list many of the “ingredients” (intelligence, creativity, curiosity, confidence (to try and accept and learn from failure), multi-disciplinary experiences and expertise) and “measurements” (such as a mix of complementary skills, a mix of roles, and a special environment (i.e., strives to learn and improve, rewards both learning and success but doesn’t penalize failure, and creates a competitive environment that understands that in most cases the team is more important than any one individual)).
That type of environment is magical when you can create it, but it takes so much more than just having people and a place that seem to match the recipe. A critical “activation” component or two is missing. Things like curiosity, creativity, ingenuity, and a bit of fearlessness.
I tend to visualize things, so while I was thinking about this I pictured a tree with multiple “brains” (my mental image looked somewhat like broccoli) that had visible roots. Those roots were creative ideas that went off in various directions. Trees with more roots that were bigger and went deeper would stand out in a forest of regular trees.
Each major branch (brain/person) would have a certain degree of independence, but ultimately everything on the tree worked as a system. To me, this description makes so much more sense than the idea of a recipe, but it still doesn’t bring me closer to being able map the DNA of this imaginary tree.
At the end of our long walk it seemed that I probably learned as much as my son did. We made a connection that will likely lead to more walks and more discussions.
And in a strange way, I can thank the purchase of these Fitbit watches for being the motivation for an activity that led to this amazing discussion. From that perspective alone this was money well spent.
Non-Linear Thought Process and a Message for my Children
I have recently been investigating and visiting universities with my eldest daughter, who is currently a Senior in High School. Last week we visited Stanford University (an amazing experience) and then we spent a week in Northern California on vacation. After being home for a day and a half I am currently in Texas for a week of team meetings and training.
The first night of a trip I seldom sleep, so I was listening to the song, “Don’t let it bring you down” by Annie Lennox, which is a cover of a Neil Young song. That led to a Youtube search for the original Neil Young version, which led to me listening to the song “Old Man” – a favorite song of mine for over 30 years. That led to some reflection which ultimately led to this post.
The reason that I mention this is because it is an example of the nonlinear or divergent thought process (which is generally viewed as a negative trait) that occurs naturally for me. It is something that helps me “connect the dots” faster and more naturally. It is a manner of thinking associated with ADHD (again, something generally viewed as negative). The interesting thing is that in order to fit in and be successful with ADHD you tend to develop logical systems for focus and consistency. For me personally, that has many positive benefits – such as systemic thinking, creating repeatable processes and automation.
The combination of linear and non-linear thinking can really fuel creativity. The downside is that it can take quite a while for others to see the potential of your ideas, which can be extremely frustrating. But, you learn to communicate better and deal with the fact that ideas can be difficult to grasp. The upside is that you tend to create relationships with other innovators because they tend to think like you, so you become relatable and interesting to them. The world is a strange place.
It is funny how there are several points in your life when you have an epiphany and things suddenly make complete sense. That causes you to realize how much time and effort could have been saved if you had only been able to figure something out sooner. As a parent I am always trying to identify and create learning shortcuts for my children so that they can reach those points much sooner than I did.
I started this post thinking that I would document as many of those lessons as possible to serve as a future reminder and possibly help others. Instead, I decided to post a few things that I view as foundational truisms in life that could help foster that personal growth process. So, here goes…
- Always work hard to be the best, but never let yourself believe that you are the best. Even if you truly are, it will be short lived as there are always people out there doing everything that they can to be the best. Ultimately, that is a good thing. You need to have enough of an ego to test the limits of things, but not one that is so big that it alienates or marginalizes those around you.
- Learn from everything you do – good and bad. Continuous improvement is so important. By focusing on this you constantly challenge yourself to try new things and find better (i.e., more effective, more efficient, and more consistent) ways to do things.
- Realize that the difference between a brilliant and a stupid idea is often perspective. Years ago I taught technical courses, and occasionally someone would describe something they did that just seemed strange or wrong. But, if you took the time to ask questions and try to understand why they did what they did you would often identify the brilliance in that approach. It is something that is both exciting and humbling.
- Incorporating new approaches or the best practices of others into your own proven methods and processes is part of continuous improvement, but it only works if you are able to set aside your ego and keep an open mind.
- Believe in yourself, even when others don’t share that belief. Remain open to feedback and constructive criticism as a way to learn and improve, but never give up on yourself. There is a huge but sometimes subtle difference between confidence and arrogance, and that line is often drawn at the point where you can accept that you might be wrong, or that there might be a better way to do something. Become the person that people like working with, and not the person that they avoid or want to see fail.
- Surround yourself with the best people that you can find. Look for people with diverse backgrounds and complementary skills. The best teams that I have ever been involved with consisted of high achievers who constantly raised the bar for each other while simultaneously creating a safety net for their teammates. The team grew and did amazing things because everyone was both very competitive and very supportive of each other.
- Keep notes or a journal because good ideas are often fleeting and hard to recall. And remember, good ideas can come from anywhere so keep track of the suggestions of others and make sure that attribute those ideas to the proper source.
- Try to make a difference in the world. Try to leave everything your “touch” (job, relationship, project, whatever) in a better state that before you were there. Helping others improve and leading by example are two simple ways of making a difference.
- Accept that failure is a natural obstacle on your path to success. You are not trying hard enough if you never fail. But, you are also not trying hard enough if you fail too often. That is very subjective, and honest introspection is your best gauge. Be accountable, accept responsibility, document the lessons learned, and move on.
- Dream big, and use that as motivation to learn new things. While I was funding medical research efforts I spent time learning about genetics, genomics, and biology. That expanded to interests in nanotechnology, artificial intelligence, machine learning, neural networks and interfaces such as natural language and non-verbal / emotional. Someday I hope to tie these together in a way that could help cure a disease (Arthritis) and improve the quality of life for millions of people. Will that ever happen? I don’t know, but I do know that if I don’t try it will never happen because of anything that I did.
- Focus on the positive, not the negative. Creativity is stifled in environments where fear and blame rule.
- Never hesitate to apologize when you are wrong. This is a sign of strength, not weakness.
- And above all else, honesty and integrity should be the foundation for everything you do and are.
Hopefully, this will help my children become the best people possible, and ideally early-on in their lives. I was 30 years old before I feel that I really had a clue about a lot of these things. Until that point I was somewhat selfish and focused on winning. Winning and success are good things, but they are better when done the right way.
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